New government expected to target wealthy tax evaders
HMRC’s elite ‘Offshore Corporate and Wealthy’ team has already begun to crack down on wealthy tax evaders even ahead of the new government’s commitment to target wealthy tax evaders, says Pinsent Masons, the multinational law firm.
Pinsent Masons says that the number of civil investigations opened by the Offshore Corporate and Wealthy team has more than doubled in the past year, rising from 284 in 2021/22 to 627 in 2022/23*. In addition, the number of criminal positive charging decisions filed by the team has risen 80% over the same period, going from 46 to 83.
The Labour Party committed in its manifesto to cracking down on tax evasion and avoidance, with the aim of raising an extra £5.2bn per year from investigations by 2028/29. Sophie Warren, Senior Tax Manager at Pinsent Masons, says that the Offshore Corporate and Wealthy (OCW) team is likely to play an important role in that project.
This team targeting tax evasion by wealthy individuals by parking assets offshore was set up in the wake of the Panama Papers scandal in 2016. It has a brief to target large-scale and deliberate tax evasion, with high-net-worth individuals being a major part of its focus. It has the power to pursue both civil investigations – with the aim of bringing in unpaid tax and the ability to levy major penalties – and criminal investigations, which can end in tax fraudsters receiving prison sentences.
The role of HMRC’s OCW team includes targeting the offshore assets of wealthy individuals, including assets in offshore bank accounts, offshore stock market trading accounts and income from offshore property.
In recent years the OCW unit handled the investigation of former Formula 1 owner Bernie Ecclestone, which concluded in October 2023. Ecclestone was accused of holding assets in an offshore trust and was convicted of tax fraud. He was ordered to pay HMRC more than £650m in tax, interest and penalties.
Sophie Warren comments: “The Offshore Corporate and Wealthy team is expected to be one HMRC’s biggest weapons in its efforts to meet the new Government’s target of bringing in tens of billions of pounds more through tax investigations during this parliament.”
“The team is likely going to be even busier in the coming years. OCW has been recruiting, with data investigations one of the areas of focus.”
“Part of OCW’s job is to go after the biggest and most egregious tax fraudsters. With the challenging targets the new government has set for tax investigations, that’s just the kind of compliance work that HMRC will be expected to do even more of.”
Pinsent Masons says that other areas that HMRC could crack down on under the new government include:
- Investigations of wealthy individuals – previous research by Pinsent Masons found that HMRC brought in an extra £30 in tax for every pound spent on investigations into wealthy individuals in the year to March 31 2023, up from £28 in 2021/22.
- Using Artificial Intelligence to target tax evaders more effectively – HMRC’s Connect system is a relatively simple database in that it does not use AI to identify its targets for investigation. Adding AI systems to the Connect database could target tax evaders much more efficiently
- Multinationals shifting profits overseas – HMRC collected an extra £1.6bn in tax through investigations into multinational businesses allocating profits to overseas ventures in the year ending March 31, 2023 – an increase of 11% from £1.5bn in the previous year
* Year end March 31 2023
